Money Farm

By Clif Miller

Two half brothers, Peter and Jim in Sydney Australia discover the phenomenon of short selling equities or shares on the global stock markets and set out to make their fortunes. With a little early bending of the rules the crime spree that follows encompasses industries as diverse as agriculture to manufacturing, banking and finance to horse racing. Crime and betrayal are not just the prerogative of the central characters however as others are drawn from across the globe to join in the frenzy. Regulators who should be there to supervise and prevent errant behaviour are themselves subject to human frailty when vast amounts of money are involved. The crime spree expands to major markets and ensnares even some rich and powerful players. In the end blind greed leads to an unwelcome denouement for some of the players while others may perceive that a certain amount of crime does, in fact, pay.

• Language: English
• Publisher: Clif Miller
• Release date: Jul 15, 2014
• ISBN: 9781310473227

Clif Miller

I was born and educated in Launceston Tasmania and then at the University of Tasmania in Hobart. While growing up I was greatly interested in the scenes of the Canadian Rocky Mountains that often featured in advertisements for the Canadian Pacific rail line. These advertisements appeared regularly on the rear cover of the National Geographic Magazine which was sent to us by a relative in Detroit Mi. As soon as was practical my wife and I left Tasmania for the Canadian province of Alberta where I taught school for a number of years and where our children were born. The cold eventually drove us back to Tasmania's more balmy climes and I taught in University Geography departments until taking early retirement and of necessity becoming somewhat of a stock market investor. This is where, as the global financial meltdown commenced in 2007 I discovered the truth about short selling practices that led to the writing of Money Farm. Since that time I have avoided the stock market and spent my time in the year round pursuits of fishing, sailing, bushwalking and gardening, roughly in that order.

Book preview

Money Farm

Clif Miller

Smashwords Edition

Copyright © 2014 Clif Miller

This work is copyright. Apart from any use permitted under the Copyright Act 1968, no part may be reproduced by any process, nor may any other exclusive right be exercised, without the permission of Clifton Leigh Miller of 6 Wynnstay Crt Blackmans Bay Hobart Tasmania Australia 7052 2014

Ebook cover and formatting by www.ebooklaunch.com

Table of Contents

Prologue

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Chapter 10

Chapter 11

Chapter 12

Chapter 13

Chapter 14

Chapter 15

Chapter 16

Epilogue

About the Author

Prologue

All the ideas and happenings in this book are fictional. Any that may resemble real events represent sheer coincidence. If there is anyone to thank for the underlying concepts it is the manipulators of the Global stock markets who use their power to deny fair and equitable access to markets for those with less or fewer resources. In particular, a large wealth management bank in Australia which advertised for its clients to give [themselves] an unfair advantage is a standout.

A degree of financial license has been exercised in the novel for convenience of the storyline. Some of the practices portrayed would need a little more fleshing out to match with reality but a forensic knowledge of financial practices is not required in order to gain insight into the core concept of shorting of stocks listed on the stock markets. The novel starts with ordinary folk and moves through stages that involve exposition of a key weakness in the stock market; a vulnerability to exploitation that sets the stage for nefarious acts. Did someone once say that art should imitate reality? This may be a poor imitation of reality and therefore may be poor art but it derives from a reality that affects all those who might otherwise believe that the financial world is peopled only by those of good will.

Chapter 1

The shade under bimini of the Manhattan 61 was just what Peter had needed. Glass of Pinot Gris in hand he studied the slender form of his latest conquest, Angelique. Tall and elegant, with beautiful green eyes and natural blonde hair that curled to her shoulders in attractive ringlets, he knew he was the envy of his wealthy mates. He had made it into the circle of the rich, he mused to himself, if not the powerful.

Peter Milner still had the look of the driven about him, even in middle age. He seemed to the casual observer to have time only for what worked to his advantage. Every conversation was guided by the invisible hand of self orientation and maximum personal benefit; whether simply in argument or more fundamentally with respect to his own now very comfortable circumstances.

This pleasure trip on his luxury motor yacht though was a little different to most; it was at least superficially more a family affair and his older brother Jim sat across from him while on the foredeck Jim’s wife Peg sunned herself on a lounge awaiting the return of Angelique with a refill for her glass. Jim was the conservative one in the family; never a risk taker like himself but nevertheless possessed of a cool head in a crisis and a useful person to have around when the going gets tough, Peter mused. They were some 45 nautical miles east-nor-east of Sydney Harbour and the day was perfect. Between brief reflection on matters family and on his brother Jim, Peter also studied the water that never ceased to amaze and fascinate him as he looked so far into the sunlit depths. Out here is paradise, he thought to himself. One could be forgiven for sometimes wishing that days like this were endless.

Soon however, his reverie was to be gently interrupted by his companion at the table.

So where did all the cash really come from Pete? said Jim quietly. What did you do with yourself in America, rob a bank or something like that?

No, mate. You wouldn’t believe how easy it was to score a few million in the last couple of years. Just got lucky on the markets really. I did make some money in America but most of it was made right here in Oz.

The nonchalant way the younger brother passed off the inquiry was characteristic of Peter who’d always preferred his own path in life, although the last five or so years had been unusual in that normally they’d got together at least once or maybe twice a year. Peter was now visibly older, observed Jim, taking in the gray around the temples, the slight thinning on top and the increased furrowing of his younger brother’s forehead, but in all he still looked the picture of good health.

How’d you do it? For a tradesman builder you went up the ladder pretty quickly. I suppose you’ll say it was all because you’re smarter than me proffered Jim.

No. I guess you could say I just backed the right horse, really. Or the right horses, ha! laughed Peter, clearly at some private joke he had made.

Or do you mean the right people? replied Jim, knowing that Peter always liked to mingle with the politically influential and powerful folk of whichever elite were best placed to serve his interests.

Okay, so there’s been some of that too he conceded. Mainly though, I’ve done pretty well investing outside the building and development sphere, such as in the stock market.

Wish you’d give me a few tips. I seem to lose just about as much as I make, what with the swings and roundabouts we’ve had ever since the neo-conservative world democracy doctrine came unstuck in the Middle East. Anyway, I s’pose I’ve not done too badly really. Peg and I have a bit put away and we still have the old van and a tinnie for week-ends away said Jim.

Yeah. Away. What from mate? The only away you can really do nowadays is like on this little 61 footer. Bit of a floating palace of course but fun too, and you can choose your neighbours whenever replied Peter.

I thought you must have hired her for the day, just to impress Peg and me replied Jim.

No mate she’s all mine as they say said Peter with some evident pride.

Okay, so are you going to tell me why all the sudden brotherly love and affection that led you to invite Peg and me to join you for a trip out through the Heads? asked Jim.

Well, I really thought it was time we got together, mended old fences and put the past behind us was the rather rehearsed reply.

Jim knew that there would be a specific reason for the hospitality. They were not enemies, the two brothers, but the rivalry of growing up in a large family in a government housing estate with nothing but what you do or earn for yourself to give you a leg up in life had led to a certain amount of competitive jealousy between all five brothers, and this state of affairs had remained throughout their adult lives.

Why, are you going soft in your old age? asked Jim. No offence, but it’s six years since we last got together and we only live about five miles apart. You still do live at Erskineville I take it? he added.

No, Jim. Moved over to where we can overlook the Harbour, just along from the marina, last year said Peter, in a rather too matter-of -fact tone, appearing to Jim to play down the significance of his arrival in the wealthy eastern suburbs.

What, Point Piper?

Yep. Bought a little unit there for just on 4 mill.

Even Jim was impressed. The only time any of them wanted to be specific about money was when it was to be used to impress their siblings. The boat under his feet had not fully done the trick because Jim did not know even approximately what one of these little fuel guzzling pleasure houses cost. Jim was older than Peter by some five years but time had appeared to treat him well. He had none of the hard-bitten look that characterized the younger man, and his voice intonation was always more easy going and relaxed. It was almost as though life and he had found an easy coexistence; that both would wear for much longer together.

Hell. You really are a multi-millionaire said Jim, endeavouring to keep as much of the genuine envy he felt out of his voice.

Like I said, it’s been easy to make money on the market and it’s going to get even better, you’ll see said Peter.

How can you be so sure? asked Jim, knowing at once that he was being led down a purposefully crafted pathway.

There are some people who take what the market gives, and others who make the market give. I’m one of them, and you can be if you want.

How? responded Jim, sensing something from the way Peter spoke that this was no throwaway line.

Well, I don’t want to involve you in anything you don’t need but it did cross my mind I could use some help from someone that wouldn’t double cross me. And you know what they say... blood being thicker than water etc. etc. said Peter, again as though the line had been rehearsed for a stage play.

The problem was, Jim knew his brother too well. When Jim was studying at university on a teaching scholarship with its attendant bond arrangement to accept the reciprocal commitment to serve the state by spending at least formative career years in its service, Peter had seen the light and gone for the opportunities presented by rising land values. He’d been an early speculative developer, building houses and making money, so that he was always more wealthy than Jim was ever likely to be. But he was not in the super rich class, or so Jim had thought to date.

Okay, so fill me in said Jim.

Not so fast mate replied Peter evenly, I need to know you want in. I need to know you won’t get squeamish with me and let me down at the last minute. So, I’m going to tell you how I made some real money recently and see if you want to get really smart and join the millionaire’s club.

Well how can I answer that before I know what it is? replied Jim.

Yeah, that was probably the difference between us. Remember when we bashed that cat to death with Mum’s saucepan?

Yeah, I do. It’s stayed with me all these years.

Well I remember it too. I remember that you were too scared to tell Mum how the bottom of the saucepan got dented, and when I suggested you tell her a snake was attacking us and we had to hit it with the saucepan you squibbed out and said you’d tell Mum that you fell on top of a rock with the bloody thing.

Well, Mum believed me said Jim.

No she didn’t. Not for long anyway, because I didn’t know you were really going to stick to the script and I told her I hit a snake with it.

So she knew at least one of us was lying, all these years eh?

Yep. Only you didn’t know that. All she said was thanks for trying to cover up for your younger brother.

Did she ever know what really happened, about the cat I mean?

Nope. Not unless you told her.

She didn’t ask me any more about it said Jim.

Would you have told her if she did?

Nope. A deal’s a deal. I thought we both had agreed about the rock idea. It’s funny how later on I got to quite like cats. We had one as a pet while the kids were growing up. You probably remember Chili?

Yes, I do replied Peter.

I really enjoyed having that cat about the house said Jim.

Anyway, you could have dobbed me in and Mum would have got Dad to give me a thrashing for killing that kitten. Dad didn’t like cats, there were too many strays around the neighbourhood, but Dad would not have tolerated the brutality inflicted by the saucepan. He didn’t mind a little brutality with a razor strop on our backsides, or even with a cane fishing rod as I recall continued Peter.

I can recall that too said Jim.

Okay, so that’s my point. A deal’s a deal. I still remember that you didn’t dob me in then. And I just wanted to remind you of that if you are going to come along with me on my next fishing expedition. The rules of engagement are set at the outset and there’s no turning back said Peter evenly.

Jim reflected for a few moments. His younger brother was unchanged as far as he could see from the brother of earlier years. A level of determination surrounded him like an aura, pervading almost every move and everything he said. There was a purpose beyond anything he would care to mention; a focus, a drive towards some unattainable goal or at least to some unknowable place that Jim had now begun to find fascinating and even alluring.

Okay Pete, so are you going to fill me in?

Yes, but not just yet. Angie and Peggy need some attention and the food’s nearly ready as well. Let’s wait until after lunch and you can steer her back to the Heads while I go over the thing with you said Peter.

Okay replied Jim, feeling very much as though he had been carefully walked through the opening phrase of a brand new waltz.

The lunch was sumptuous with cold seafood including prawns, shellfish crayfish tails and lashings of cold smoked salmon. Jim relaxed and was pleased at the experience both for himself but especially for Peg who had complained of late that their lives were becoming a little dull in retirement.

The soporific motion of the boat in the gentle Nor-Easter occupied the next couple of hours as the reef below was hunted by fish finder and baited hook. The tally for the day amounted to a half eskie of fillets, mainly schnapper and a few blue-eye. Jim enjoyed himself greatly as he normally got only a mile or two offshore in sheltered waters in his 5 metre aluminium runabout and this type a fishing was a rare occurrence. He liked also that for once he had no responsibility for cleaning and filleting the fish. This was left to the two competent crew who were there to organize everything from catering and meal preparation boat maintenance and other tasks.

All this was a new and enjoyable experience. A niggle of doubt or potential need for caution was there in the back of Jim’s mind but was constantly pushed to the background as the little luxuries of the day unfolded. As well, there was the lithe and lovely Angelique who seemed to treat all the males aboard, including the two crew, as special, although Peg was obviously keeping a rather bemused eye on the proceedings from her lounge on the foredeck.

Jim sensed in Angelique that she was much more than merely Peter’s latest plaything. There was a genuine affection between the pair. Peter also seemed far more relaxed with her than Jim had ever seen him in company with other females. The touch of the exotic in her accent and manner also became infectious and had its own relaxing effect. There was, though, Jim decided as he watched her, also a level of intelligence and insightfulness that went well beyond the superficial beauty that she displayed so well.

The care with which the crew washed the blood spatters from the deck and combings and hosed out and flushed the residue from the fish cleaning was also a delight. The hired crew was also communicative and friendly and nothing seemed too much trouble for them. They appeared to know Peter well, as though they had worked for him for some time. They also appeared to be very competent with regard to the boat and its systems. Jim felt relaxed but he knew he was in company that saw him as the outsider yet to be admitted.

On the run back to the Heads Peter had taken the helm and he slowed the vessel to about 15 knots and then motioned for Jim to take over.

Not had too much to drink, eh mate? said Peter.

Nah, never can drink much at sea anyway. Gives me the heaves, so took it rather easy really. Still feel a bit woozy responded Jim.

You should have said. There’s some pills for seasickness in the drawer there, ‘Level-C’. Made by a bloke I know. Great stuff. Fix you up in a trice.

Brilliant. I’ll try one said Jim.

Take two. Twenty minutes, guaranteed.

Thanks.

Okay, so you want to know how I got to this little level of affluence eh? asked Peter.

Well you’ve sure done a site better than the average punter like me replied Jim.

Thought you’d have a pension from the University? said Peter.

Nah, not me replied Jim. They chew you up and spit out the remains. Nothing left at the end for the kids. No, I took a package when I retired. Self-managed, that’s Peg and me. Average battlers I suppose.

We were all average battlers Jim said Peter but a few years ago I began to think that being average was what was wrong with most people. Then I won a contract to build a house for this broker bloke who later became quite famous before the system got him.

Was that Rabbi Rudi Lodl or someone? asked Jim.

Yeh, but that’s not the point really. He just showed me the way and I went from there responded the younger brother.

So what did you do to rise above the crowd? asked Jim.

Well I did pretty well with the building as you know. But after a while I got a bit tired of the routine. Itchy feet they call it. Anyhow when I met my Jewish friend I had a bit put away and he started telling me about the ways that people can make money even when the share market is falling through the floor said Peter.

Is that what trading in CFD’s and warrants and stuff is all about? asked Jim. I’ve never been into that. I’ve always felt it was too complicated and risky.

Well, there are many different ways that markets can be bought and sold but one of the best is a thing called simply ‘short selling said Peter.

Yeah, I’ve heard of it but how does it actually work? asked Jim.

It’s fairly straight forward really. All you do is work out which company or companies are going to have a problem in the market place sometime in the next few months or so and after you’ve established your bona fides with the broker by putting up some collateral against the thing going wrong, you get into the market and sell as many of the company’s shares as your cash limit will allow you to do. Then you sit back and wait until the shit hits the fan so to speak and then move back in and pick up the same shares for half the price. The rest’s nearly all profit, after broker expenses and costs of finance said Peter.

But you’d have to deliver the shares you’ve sold within three days as I understand things Peter said Jim. How could you be certain of the thing falling your way in that time?

"No mate. This is the really stupid thing. You can have your broker guarantee your position for up to eleven months, though usually more like three or four months. As long as he has clients holding sufficient script to cover your selling you don’t actually have to hold the script yourself Your broker kind of acts as surety and on-lends the shares he holds until you replace them with new shares purchased much later.

But can’t it all go wrong on the upside? asked Jim.

Of course it can. You might sell down a mining stock the day before it announces a major gold find. It’s known as a risk factor said Peter.

So what happens then? said Jim.

Well buddy, you lose your shirt. So the idea is not to back a gold explorer or some other company that you can’t be more certain about replied Peter. There’s also a way to sell down stock that you have borrowed Peter continued. This is known as ‘covered short selling’. It means you don’t even have to have a bank guarantee to stake against possible losses; you simply run the risk of losing the shares you actually sell or of losing when you have to buy them back at a higher price than your selling price. The real point is that with covered short selling someone else runs the risk of having to take the loss, especially if you disappear in the meantime. Usually the lender is the retail client of a superannuation fund or of a merchant bank or brokerage house. Often people don’t even know that the shares they thought they owned are being ‘lent’ out for this practice that almost invariably means they will lose money on the activity because their own shares will be returned to them after the price or value of them has been reduced.

Okay, so for an example, a terrorist brings down an aircraft somewhere overseas and I suppose you get in and sell the shares of the local airline? asked Jim.

No. You need to know about an event before it happens. Once the news of an unfortunate event breaks, the shares of affected companies are already likely to be on the way to the bottom. You can’t sell enough of them in time to be able to make much money by buying them again at the bottom. There are just too many players with the same idea in most markets Peter replied.

So the key thing then is information about events before they happen said Jim, wondering where this might lead.

Exactly said the younger brother exactly mate.

So I suppose you are now going to tell me you have to have a hand in the cause of the problem? asked Jim, not certain that he really wanted to know the answer to the question.

Well, maybe. Or just find out from an inside source that something is going pear- shaped said Peter.

So what companies did you sell down before they hit the dust?

No names no pack drill mate. Let’s just say I knew a few things in advance. Anyway, most of that was while I was in California and New York, although I did manage a few escapades before I went overseas as well. Jim noted the apparent contradiction with Peter’s earlier claim to have made most of his money in Australia, but he let it slip for the time being.

Okay, but you got to know something before the market knew? enquired Jim.

Yep replied Peter, succinctly.

So, try me out with an example said Jim. I’d like to know more.

Right replied Peter a mate of mine in Irvine, that’s a part of Orange County south of Los Angeles, worked for a large house construction company. Of course, any company you are dealing with has to be listed on the Stock Exchange. And he let me in early on that this company was having trouble as their sales were off by more than forty-five percent.

So you sold them down early?

Sure did, and made a killing just four months later after they announced their profit slump. Much more than a killing actually. First I leveraged everything I owned in order to build a security deposit, then with very little cost to the security balance except for the bank’s fees and charges as well as the opportunity costs of lost interest on my security deposit I made twelve million dollars profit in just over four months said Peter.

Was it legal? asked Jim.

How long is a piece of string? Some might call it insider trading, but I was not inside the company and as far as anyone knew I did not have access to company information responded Peter.

But your mate was inside the company said Jim. Surely he would be in some sort of difficulty?

Only if he blabbed about telling someone about the company’s problems replied Peter.

Well, someone had to lose all that money said Jim.

Yep said Peter.

Doesn’t that worry you? asked Jim.

It’s the system mate said Peter.

Okay, it’s the system, but isn’t it unfair on the blighters who didn’t know about the slowdown in time to dump their shares? asked Jim.

That’s not my worry. They could have informed themselves by just going out to the sub-divisions and seeing first hand what was happening said Peter.

Yeah, but it’s not always so easy. How do you pick up on the information just by making a few odd visits to where they’re selling houses? asked Jim.

Alright then, you could phone them up and ask them directly how sales are going offered Peter.

Will they tell you? asked Jim.

"Probably not. More likely tell you a pack of porkies or refer you to their share registry for the latest official report. But of course that’s months